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Many people who do not wish to set up a big business and are satisfied with small business but want to take benefits from each other in terms of capital, expertise, know-how etc have the option of setting up a partnership in Canada. This article discusses the process of setting up a partnership in Canada.
Table of Contents
The Canadian law offers two types of partnerships i.e. general partnership[1] and limited partnership. In general partnership all the partners share both profit and loss and are personally and jointly liable for the all the liabilities arising from such partnership.
However, in case of Limited Partnership, both general and limited partners exist. The limited partners do not involve themselves in the day-to-day affairs of the business and the extent of their personal liability extends to the amount of capital the limited partner has invested in the business in case the partnership goes into losses. On the other hand the general partner is liable for the day-to-day operations of the business and the extent of his liability is both joint and several.
Following is the step by step process of setting up a partnership in Canada:
One thing that the partners must keep in mind before finalising the name of the partnership is that the legal identifiers such as ‘Limited, Ltd., Incorporated, Corp, Corporation, Inc.’ should not be added to the name of the partnership since these legal identifiers have been reserved for the incorporated companies only and cannot be used for the purpose of partnership or sole proprietorship.
In the absence of a proper partnership agreement, the applicable partnership Act shall come into force and can make the matters further difficult and expensive in resolving disputes or handling the unexpected termination of the dispute.
It must be noted that having a partnership agreement in case of a general partnership is optional. However, in case of limited partnerships, a partnership agreement is mandatory.
The abovementioned steps gives the overview of the step-by-step process of establishing a partnership business in Canada and the ease with which a business can be carried out if the partners want to keep the business structure simple and inexpensive. If an option exists choosing between a general partnership and limited partnership, it is always recommended to have a limited partnership as it limits the extent of liability of the partners and save them personal liability.
Read Our Article: How to Start Small Business in Canada
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